Fairness of dismissal for Operational Requirements

We dealt previously with the fairness of dismissal for misconduct, and for Incapacity – Poor Work Performance, as well as dismissal based on incapacity due to ill health.. We are now taking a look at the fairness of dismissal based on operational requirements.

Operational requirements are defined in section 213 of the LRA to be" economical, technological, structural or similar needs of the employer." Dismissals for operational requirements are classed as "no fault" dismissals - meaning that the dismissal is not due to any fault of the employee.

It is well known that employers utilise dismissals based on operational requirements is a disguise for what is in actual fact a dismissal based on misconduct or incapacity - the errant employee's job suddenly becomes redundant, or the poorly performing employee's job suddenly becomes redundant.

For this reason, a dispute  of unfair dismissal for operational requirements is examined very closely by the Courts. In SACTWU & others v Discreto ( A Division of Trump & Springbok Holdings), the Labour appeal Court ruled that 'for the employee, fairness is found in the requirement of consultation prior to a final decision on retrenchment."

This implies that the decision to retrench is the last decision to be made in the process, and not the first decision. The ruling goes on to say that "this requirement is essentially a formal or procedural one, but has a substantive purpose.  That purpose is to ensure that the ultimate decision on retrenchment is properly and genuinely justifiable by operational requirements or, put another way, by a commercial or business rationale."

This seems to imply that the there is the duty on the employer in such disputes to show that the decision to retrench was properly and genuinely justifiable by operational requirements. Employers must therefore be aware that the reasons for the retrenchment will come under scrutiny  the Courts.

The ruling states further that "the function of a court in scrutinising the consultation process is not to second-guess the commercial or business efficacy of the employer's ultimate decision, but to pass judgement on whether the ultimate decision arrived at was genuine and not merely a sham."

This makes it quite obvious that the Court will scrutinise the consultation process that was followed by the employer prior to taking the final decision to retrench. That scrutiny will also include analysing whether the ultimate decision to retrench was based on genuine operational requirements, and was not merely a dismissal for incapacity or misconduct, disguised as a retrenchment.

The ruling states further that when determining the rationality of the employer's ultimate decision, it is not the Courts function to decide whether it was the best decision under the circumstances, but only whether it was a rational commercial or operational decision,  taking into account what emerged during the consultation process. Thus, it is obvious that the consultation process is an absolute must - and is no way for the employer to avoid consultation.

Employers who employ persons on a fixed term contracts should take note that in Buthlezi v Municipal Demarcation Board, the Labour Appeal Court ruled that the premature termination of a fixed term contract on the basis of operational requirements is substantively unfair, as such termination would be in breach of the employee's common law rights.

Restructuring at a workplace can, in certain circumstances, necessitate changes  to terms and conditions of employment.  If an employee refuses to accept changes which are necessary to meet the operational requirements of the business, dismissal will be justified.

In Fry's Metals (Pty) Ltd v NUMSA & others, Judge Zondo held that while section 187 (1) (c) of the LRA prohibits dismissal if the reason is to compel the employees to accept the employer's demand in respect of a matter of mutual interest, if the reason is to "get rid of employees that do not meet the business requirements of the employer, so that new employees who will meet the business requirements can be employed", such dismissals will fall within section 189 - dismissals for operational requirements.

It must be pointed out that employers that the reference in the above ruling to "employees that do not meet the business requirements of the employer" does not  refer to employees whose work performance is not up to standard. Such instances clearly fall within the realm of incapacity, and other procedures exist for addressing such issues.

Therefore, an employee whose work performance is not up to standard due to some form of incapacity, or any incapacity based on ill health or injury, does not fall within the reference to " employees that do not meet the business requirements of the employer."

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